After the midterm elections, things look like things will get rough for Elon Musk and data centers.

The Democrats’ historic victory in this week’s midterm elections could have a dramatic impact on the technology industry.

In dozens of local ballots, voters rejected data centers. And even when they weren’t directly voting on the issue, they were electing politicians like Texas Governor-elect Gina Hinojosa who campaigned on promises to restrict data centers.

On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I discuss what the midterm elections mean for the tech industry. Sean opened by saying that Elon Musk is “giving $500 million and basically doing nothing” to Republicans, but pointed out that his company is currently headquartered in a state that “surprisingly is about as blue as it gets.”

And while data centers probably aren’t the main cause of the “blue wave,” Kirsten said, “it’s becoming more and more of a grassroots issue, partly because of the way hyperscalers and companies are approaching it” to get projects approved. And now, “we’re already seeing companies like OpenAI suddenly say, ‘Actually, we can change the policy.'”

Continue reading for a preview of the conversation, edited for length and clarity.

Sean O’Kane: First of all, let’s talk about the fact that one of the largest data center construction companies was also the largest donor to the Republican Party. Elon Musk appears to have gotten essentially nothing from his $500 million donation, and by the time we see the final tally it will likely be more. And in fact, his whole business is sitting there now surprisingly, maybe for the first time in a very long time, in a blue state.

I think that’s the biggest issue that’s at stake in a lot of this discussion. But a number of ballot measures were also filed around the country to pave the way for faster construction of data centers. Almost all were shot down or voted down. (In fact, many of the ballot measures imposed restrictions or moratoriums on data centers, and nearly all of those measures passed.)

With (Democrats) in power, the consensus view, at least in the tech world, is that this means there will be a lot of hurdles in the way of data centers, especially in places like Texas. Texas has people like Governor-elect (Gina) Hinojosa (and you too). He has been quite candid about this being a campaign promise and something he wants to focus on once he comes to power, now that he has defeated Greg Abbott.

I think the tech world is probably paying a little too much attention to it. I’m interested in what you guys think about that.

Anthony Ha: I don’t necessarily think they focus too much on that, but I can understand why it feels a little out of proportion. There were data center voting measures, certainly a number of measures, but it wasn’t something that appeared on ballots everywhere.

And while the dynamics may have been a little different for different races, there was an undercurrent and a sense that this issue seemed to be a national, bipartisan issue in many ways, but Democrats seemed to be able to tap into that energy more effectively. And of course, there are many reasons why Democrats did so well on Tuesday, but anti-AI, and anti-data center sentiment in particular, appears to have been a big part of it. That seems like a pretty powerful political force.

The next two years, and perhaps beyond, will be much more difficult for technology companies in general and hyperscalers and data center companies in particular. I also imagine they might have a little bit to worry about. Will this continue to be an issue not just for those elected this year, but potentially in 2028 and beyond?

Kirsten Kolosek: Of course. I don’t think data center issues are what drove people to vote and caused the quote-unquote “blue wave.” But data centers are increasingly becoming a grassroots issue. Part of the reason is how hyperscalers and companies have approached setting up (approval of) data centers. It is highly secretive, often requiring NDAs from elected and appointed officials, and often does not share information about the scale of projects in highly environmentally sensitive regions, such as the Southwest, where water scarcity issues are very acute.

So I think a lot of Republicans, independents, and Democrats thought this was wrong. They were motivated by it, but I don’t think it was a particular problem.

Now, here’s where it gets interesting. There was a lot of hand waving about how[AI companies]couldn’t do business in other situations. And we’re already seeing companies like OpenAI suddenly say, “Actually, we can change the policy.” They released something called the Computing Campus Policy Blueprint. And guess what? No more NDAs. They will share plans and perhaps operate more covertly.

I think what this shows is that if you give the market regulatory certainty, or at least a sign of moving in that direction, companies will respond. Otherwise, they won’t necessarily do what we want.

Anthony: One of the things I want to highlight is that they call this the “Computing Campus Policy.” And part of that effort is not only to explain these policy changes, but also an attempt to rebrand the data center. Because the word data center has become a very toxic word. So they’re no longer data centers, they’re computing campuses, but I’m curious if either of you think that’s what it takes.

Sean: I mean, this is ridiculous. Come. It doesn’t change anything. It will give them more effort. Although the company likes to say it’s no longer focused on sidequests, OpenAI still likes to go in different directions. And this is just the latest kind of thing where you’re like, “Why are we spending time on this in the first place?” There is no sign that the needle will move.

Kirsten: We have great ideas for OpenAI. Because in the spirit of making the threatening look cute, instead of data centers that consume power, energy, and water, we need to create avatars for computing campuses that are 100% (a) cute and just present it.

Anthony: And if these are just nice computing campuses, you can build your own office there or work next door and see how it works.

Another thing I’m curious about is the extent to which this election will be the second one-two punch. There’s been a big shift in Wall Street’s reaction to a lot of these hyperscalers and AI companies, a sense that[investors]aren’t excited about the idea of ​​having to spend all of this money building new data centers and computing. So there’s an economic incentive not to build all these data centers.

I’m very interested to see how that plays out. Building data centers will likely be difficult (from a regulatory perspective). Wall Street probably isn’t going to reward you for building data centers. But at the same time, you’ll probably need to build a data center somewhere to reach the scale you’re aiming for.